Russian inflation soars

​January consumer prices rose 15 % y-o-y. Inflation last ran this high in 2008. Food prices were up 21 % and other goods 11 %. The Russian government, concerned about the rapid inflation, has adopted numerous measures to deal with the situation. The Federal Anti-Monopoly Service and regional officials have been tasked with monitoring price trends and taking steps to rein in inflation. Their opportunities for trimming inflation are limited, however, as the biggest drivers of inflation are outside their scope of influence. For example, the economy ministry notes that of last year’s 11.5 % inflation, over 4 percentage points came from the ruble’s decline and over 1 percentage point from the ban on food imports.
 
The latest economy ministry forecast shows that the biggest impacts of banning food imports are only becoming apparent this year. It predicts the rise in food prices will accelerate in the first half of the year. About a quarter of the overall inflation will come from the ban on food imports.
 
Although Russian law only allows price controls for northern regions, officials in other regions have given guidelines to sellers and producers, and even regulations on the pricing of basic foodstuffs. Sellers and producers are committed e.g. to limiting profit margins or price increases. Some large retail chains have gone so far as to temporarily freeze their prices of basic goods.
 
Officials are also concerned about the sharp rise in prices of medicines. Prime minister Dmitri Medvedev warned last week that medicine prices could rise as much as 20 % this year. Health ministry price monitoring found that in January regulated prices of life-saving medicines were up 4 % and other drugs 15 %. The ministry is encouraging regional officials to be on the lookout for price gouging. Recently, the government expanded the list of medicines whose prices are regulated and is currently preparing a decree on regulating prices of medical equipment. Russia still imports a large share of its pharmaceuticals.
 
Oil companies have complained to the government about substantial hikes in pipeline prices, which have been driven up by prices in the domestic metal industry. Export earnings of the metal industry in ruble terms have risen with the collapse of the ruble, which has made the industry to increase its exports and hike domestic prices. Trade and industry minister Denis Manturov last week called on the metal industry to change its pricing policies. If this doesn’t happen, he said, the government would have to impose heavy duties on metal exports and even “resort to other measures.”
 
The government has imposed an export duty on wheat since the start of this month. The minimum duty is €35 per metric ton, and remains in force until the end of June. The limits on exports are seen as a way to lower the rapid rise in domestic prices and boost supply. Before imposing the export duty, wheat exports were limited by informal methods such as slowing the processing times of quality certifications and reducing rail transport. Grain exporters have complained to the government about the practices.